UK airline Monarch sees rising competition in European short-haul

LONDON (Reuters) - British airline group Monarch MONA.UL expects the short-haul European market to get tougher as competition from larger rivals Ryanair RYA.I and easyJet EZJ.L mounts, eclipsing any benefits from Britain's economic recovery.

Privately-held Monarch is emerging from a two-year turnaround plan aimed at helping it compete against the no-frills carriers which dominate Europe’s airspace, but still has some way to go before matching their low-cost model.

As part of its modernisation plan, Monarch said on Wednesday it is buying 60 new single-aisle jets and hopes to finalise the $2.5 billion order by the end of February. The group is mulling offers from Boeing BA.N, Airbus EAD.PA and Bombardier BBDb.TO, Chairman Iain Rawlinson told Reuters.

Ryanair, Europe's biggest airline by passenger numbers, Norwegian NWC.OL and Aer Lingus AERL.I, have warned that cut-throat competition is pushing down prices.

“The overall economic backdrop isn’t going to give us a great improvement in the short term,” Rawlinson said in an interview, adding that over-capacity in the market would be an ongoing challenge for the group.

Monarch, which primarily operates flights between the UK and Mediterranean destinations, said it was seeing capacity rising from growing European airlines like Vueling, owned by British Airways parent IAG ICAG.L, and Hungary's Wizz Air, and specifically from Norwegian's expansion at London's Gatwick airport.

When asked if the market was set to get tougher Rawlinson said: “Yes, we think it will. And therefore to have a very clear differentiated approach to the market is vital. For us that means focusing on the true differentiation which is superior customer experience.”

In September Ryanair said it would ditch its “abrupt culture” to win more customers.

EasyJet, which carried 61 million passengers this year compared to the 7 million Monarch carried, was ahead of Ryanair in issuing ticketed seating, putting it on the front foot in terms of customer service and helping it post upbeat results in November.

($1 = 0.6087 British pounds)

Reporting by Sarah Young; Editing by Louise Heavens